How to buy non-fungible tokens (NFTs) in three simple steps
This is a question that has gone through dramatic periods of popularity and will be one that always peaks during market euphoria and bull conditions. Demand for the answer to this question has declined in recent months (from a purely statistical outlook) as we move further into a bear market, however, it’s during these down cycle periods that learning and preparing are at their most important. You are in the right place, educating yourself now is what has the potential to position you to make the most of the bull market when it returns.
The question ‘How to buy NFTs’ will have different answers depending on things like experience level and risk tolerance, plus there are a vast array of points that contribute to knowing which NFTs to buy. At times, it can also be the case that unexpected outcomes emerge from not sticking to any of said points. However, it's good to try and have some non-negotiables when it comes to buying NFTs, particularly if you are just starting out in the space.
So with that being said, let’s get into 3 common non-negotiables when thinking about how to buy NFTs.
Firstly, NFTs is the broadest possible term alongside the likes of digital assets. The reality is they can be split into a variety of different categories including the likes of; PFP (profile picture) collections, fine art, generative art, photography, access tokens, gaming, and a lot more. Educating yourself on these different categories, what they mean, and what the NFTs look like from each is a vital first step when deciding which ones to buy.
Before buying, especially for the first time, it's important to choose an initial direction you would like to go, as it will allow you to focus your research in that particular area. As you dive into doing your due diligence, you may come across some categories that have NFTs created from Web2 brands you recognize and have interacted with in the past. Buying NFTs from said brands could be a great place to start for beginners, as the experience is likely to be smooth and the worry of buying from a collection that end’s up being a scam diminishes significantly here. Obviously, in some cases like Nike & RTFKT, there is a hefty price tag that comes with being a part of their ecosystem, however, there are a variety of others like Puma, Reddit, etc that have much less daunting entry points.
In an ideal world, aligning a current passion with an NFT category would be the perfect starting point to begin exploring the space.
This point is a nice segway from what was discussed in the section above.
Whether they are from an already recognized brand or not, something to keep front of mind when buying NFTs is that they are all extremely volatile from an investment standpoint, and you should operate thinking that there are zero exceptions to this rule. However, buying from reputable artists and team operators that are identified by doing your own research will give you that much more confidence, and contentment in the purchase you are making.
Something to not get sucked in by is placing too much faith in collections that are simply verified on NFT marketplaces like OpenSea, yes that’s one very important piece of the puzzle to consider during the final purchase phase but should not be the single determining factor on whether a team or artist is proven in the space. A traditional artist you have followed for many years that has just entered the NFT space is unlikely to have their collections verified on marketplaces, so arriving on the collection page link through the cross-checking of appropriate channels like Discord, Twitter (other socials), website, etc is vital here. The unfortunate truth is that there are many NFT collections on the likes of OpenSea, and other marketplaces with a verified blue check mark that have been rugged since receiving verification, were scams, or simply no longer have the runway to continue providing value to their holders and community.
Clearly, there are no guarantees in this space, and in many ways, it can still be a minefield to operate in, but when thinking about how to buy NFTs, backing proven operators, and artists that are reputable or that you know of personally should be extremely high on your list of priorities.
This is arguably the most important point to consider when buying NFTs, especially when it comes to collections with a focus on the art category.
Buying a piece of NFT art you truly like to look at, appreciate, and enjoy owning will make it easier for you to ride the inevitable bumpy price action. Plus, purchasing with some initial preferences like color, shape, design, etc in mind will provide some extremely useful parameters as you search through NFT collections that can have hundreds of individual traits and thousands of combinations.
A couple of good questions to ask yourself when buying NFTs that place importance on how they look visually is:
‘Would I enjoy looking at this each day if it was up on my wall at home?’
‘Would I like to represent myself online with this NFT?’
Ultimately, all that matters if you plan on holding an NFT for the long term is that you like and resonate with it, other people's opinions shouldn’t impact the decision. However, if you are buying purely with the goal of flipping or re-selling, there is a completely different set of rules to follow, but more on that in another blog post.